Always do the right thing: Steve Fleming

An early mentor’s advice to always do the right thing has stuck with Steve Fleming throughout a long career in mortgage lending and now in commercial real estate development. In this podcast, Fleming, a 1984 Harbert finance graduate, also shares his experiences as a founder of On To Victory, Auburn’s Name, Image and Likeness collective.

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Narrator:

Welcome to the Harbert College of Business Podcast with your hosts, Sarah Gascon and Currie Dyess. Today's guest is commercial real estate developer Steve Fleming, a 1984 Harbert Finance graduate. Fleming is also a founder of On To Victory: The Auburn Name, Image, and Likeness Collective.

Currie Dyess:

Steve Fleming, War Eagle.

Steve Fleming:

War Eagle. How are you?

Currie:

We are outstanding. Thank you so much.

Sarah Gascon:

Thank you so much for joining us today.

Steve Fleming:

Glad to be here.

Sarah:

What attracted you to banking and finance?

Steve Fleming:

I've always been a numbers guy. I've always enjoyed the mathematics part of it. When I came to school at Auburn, I started out in pharmacy, actually; don't ask me why. I got into advanced chemistry and advanced math pretty early, and decided that the chemistry part really didn't fit with that side of my brain.

So I looked around campus, and decided that business was really where I wanted to be, and didn't really have the passion for accounting. That's a little bit too numbers-focused.

So I wound up getting into finance, which led me into a career of mortgage: where you're kind of marrying a little bit of sales and a little bit of numbers. You have to be pretty good at both of them, and it just was a really good fit for my personality and my brain.

Currie:

What is something that will make a young person successful in that industry?

Steve Fleming:

There's two sides to the mortgage game, and I'm going to talk mostly about the sale side, the loan originator side. That's where most of the people, I think in this audience, will be going with their career path.

One's, you have to have a little bit of an outgoing personality. You have to have a sales personality. But you also have to be really good with numbers; you have to be really good with details.

Because when you get into mortgage, a 99% success rate on getting a loan approved isn't good enough. You have to have 100%; you have to be very detail-oriented. So marrying the two of those is sometimes a challenge. The people who are pure numbers-oriented are not always the best salespeople.

One thing I find interesting is I've talked to several students in finance at Auburn. They're a finance major, and they generally are headed down that path because they're more just numbers-oriented. I've talked to some marketing folks who are more outgoing, the more sales- oriented.

And especially the people in finance don't always think that maybe they're that salesperson; that's not what their career path is going to be. I would encourage them to stop and revisit that for just a minute. Because mortgage is sales, but you're really selling something that the customers already decided they wanted.

It may be that they're in their apartment after college, and they decide they want to buy their first house. You don't have to go out and convince them that they need to buy a car, they need to buy insurance. They need to buy an annuity. They've already decided they want to buy a new house. Or they want a vacation house. Or their rate's at 7%, rates have dropped to four, and they want to save $400 a month.

So it's a way to get into sales, which means you've got variable flexible income, but you're not really into pure sales. You're still using your numbers background while you're still in sales.

Sarah:

Did that come naturally to you? Your fun personality and your ability to communicate with people?

Steve Fleming:

When I took my first job, I started out at Jefferson Federal Savings and Loan as a branch manager, running a branch, tellers. Then we also did some mortgages, and I took my first job at First Commercial Bank as a mortgage loan originator.

And a friend of mine was working at that bank; and I bet she moved to a different role when I took her slot; she was an in-house loan originator. What that means is the branch would bring her people and go, "Here's Bob Smith, here's Sally Jones. They want to buy a house. Would you finance it for them?" So I thought, "That's pretty cool. That's a way to be a loan officer and have the bank feed me business."

What I didn't realize until my third day there is, "Oh crap, I'm in sales. They expect me to get out and hit the street, go out and make cold calls and call on real estate agents." That was a little bit traumatic.

But I'm fortunate. Not only do I have a degree from Auburn, but I have a background from Auburn where Auburn taught me how to deal with people, how to interact with people. So I just reached back to my non-finance training at Auburn, put on that smiley face, went out, toughed it out, and did fairly well at it.

I was a pure loan originator for three years, had a pretty successful three-year career, and then I got hired by a bank to be the president of a mortgage company, which is a really pretty short path. But I was very fortunate.

Currie:

For somebody that is new to the mortgage industry, what are some of the continuing education resources that you yourself have used, and would recommend to them?

Steve Fleming:

My biggest recommendation is if you're going to get in the mortgage business, is you need to be with a company that's got enough depth and enough resources to provide you with other opportunities.

What I mean by that is a loan originator, if you're going to be that salesperson out there selling mortgage business; that's the glamorous position, that's the one that makes all the money. You don't want to be a donut. A donut is pretty and shiny on the outside and a big hole in the middle, and there's that missing knowledge base.

So what I always try to do is get somebody who's going to be a prospective loan officer to start with the company and start as a loan processor, as an administrative assistant.

Now, the problem is most of them are like, "Yeah, I hear you, but I want to make $200,000 next year, so I'm going to go straight into sales." And there's some people who've had success with that.

But I think the people who are long-term, going to grow their career, if you can start out and basically consider your first job in mortgage as graduate school, where you're getting paid a little money.

You're not going to get paid $200,000. But you're going to get paid a salary, and you're going to build a foundation of knowledge that is super important. And the people that I've seen over my career who've been the most long-term successful, have that kind of background.

Sarah:

After a long impressive career in mortgage, you set out on your own path, starting Fleming Commercial Properties. What made you decide to bet on yourself and do your own thing?

Steve Fleming:

Part of it is being in the right place at the right time. And the right place was Auburn, Alabama. It's just Auburn is my happy place. In addition to having a vested financial interest, it's also where my heart is; it's where my home is. So I saw an opportunity to invest where I live, and we have a wonderful university right across the street from downtown Auburn.

One of the nice things about having a university environment is, unlike going to some towns that you may buy a restaurant building that is going to be a lunch place, but all the businesspeople go home in the evening; or you may buy a restaurant that's open for dinner only, but it's closed for lunch because it's not in the right location; downtown Auburn is really a lunch-and-dinner crowd.

So I saw an opportunity to purchase real estate where the people who run the real estate; the people who manage the restaurants, the business; actually had a double income stream. I thought that was a compelling way to get in the business. And it turned out that if you know anything about downtown Auburn, the rent rates in downtown are very high, but it's partly because we have that double lunch-dinner crowd.

Sarah:

Yeah, it seems like that's a crowd that's pretty consistent throughout the year.

Steve Fleming:

They used to say the J months were the hard months for the merchants: the January, June and July, which are the times that students generally aren't here. But I can tell you the J months are getting much better.

January's, right after Christmas, still a little bit slow. But June and July, there's so many counts. There's so many volleyball tournaments, travel sports are coming into town. Downtown's pretty active 10, 11, 12 months out of the year now.

Sarah:

Yeah. Also, the different festivities and activities and events that are occurring downtown: I feel like they're really trying to make it a scene down there for everybody, and very family-friendly as well.

Steve Fleming:

The Merchants Association's done a really good job of trying to bring in Cheers on the Corner or the Art Walk or different things in those J months, where they're trying to bring people in that normally wouldn't come downtown, because maybe they can't get parking or students are around and it's so crowded. And they've done a really good job of bringing in that diversity, and that different customer base during those months.

Sarah:

You've been closing down some of those streets too, to make-

Steve Fleming:

Closing down. If you're driving through town, I'm sure it's a pain, but if you're coming down to a festival, it's really cool that you can just walk around downtown and-

Currie:

Oh yeah.

Steve Fleming:

... you have a Diet Coke and a hotdog or whatever, and just walk through the streets. It's really fun.

Sarah:

So tell us about building The Whatley. What an exciting project for you. And it looks beautiful, by the way.

Steve Fleming:

Thank you. It was definitely a project of my passion.

I bought a GameDay Condo in downtown Auburn in 2007, and loved downtown Auburn. It was just something about the vibe, the energy there. You can walk everywhere. It's the most urban location; at least in Alabama, if not the Southeast; where you can literally walk out your door and do almost everything you need.

But it was a 1200-square-foot condo. And I wanted to live, full-time live in downtown Auburn, and I needed more space than that. So I was fortunate to work with the Whatley family, have an attorney, Nancy Davis that opened a lot of doors for me, and we built The Whatley Building.

It was incredibly challenging, it was a property line to property line. So we had to have some construction easements that were very difficult. We built it at a price point that Auburn had not had before. So there was a pretty good bit of risk of building something speculative, on the hope that it would sell.

Well, I know Auburn people well enough that this is a beautiful location with a beautiful view. It got great balconies across the front. And I kept telling myself, "As soon as football season gets here, I'll sell every one of these units. People will come stand on the balconies, they'll see the stadium, I'll sell them. I'm taking a little bit of risk for a short period of time, but when football season gets here, I'm golden."

Well, then COVID hit, and we were building the building right in the middle of COVID. So there was no football season. The people that came to town would come to town and leave right after. They didn't go downtown. They didn't walk through Samford Park. So it was a very stressful project.

However, there was enough people. One would buy, and then they would tell a friend, another'd buy. It turned out to be a really nice project, and it was very challenging. Probably a veteran real estate developer wouldn't have taken it on, because there were so many challenges.

But I was just too dumb to know better, and built a building that turned out to be really ... hopefully, a nice asset for Auburn. Which then segued into part B of the development, which is the Publix on Gay Street back behind us, which was a much-needed thing for everybody downtown: for the students, for the faculty, for just the people who live downtown. So Publix has been a really nice addition to downtown.

Currie:

Did your passion for Auburn drive you to the commercial real estate development there? Or did you have a passion for the commercial real estate development, and just knew that Auburn was the place you wanted to do it?

Steve Fleming:

Well, I sort of got into commercial by accident, to be honest with you. When I first started, I had a condo at the 140 North College Condo downtown, which is that five-story white condo building, two doors down from Mellow Mushroom. I had the top fifth-floor unit, which again was great, but it was 1200 square feet. I needed more space.

So at that time, Cheng-Du was a Chinese restaurant, right next door, came on the market. Real estate agent called me and said, "I can get you this building if you want it."

So my thought was, "Well, I'll buy that building, tear it down, do a five-story building. I'll knock the wall out of my condo and expand over and have double the amount of space. Have some space in the middle, but I really need a 3,000 or 4,000 square foot space to live in Auburn."

So I bought it, went to an architect, drew some plans up. It worked out really well. The problem is it's a 24-foot-wide building, 100 feet long. When you have to have two stairwells and an elevator, there's really no room left in there.

So I was talking to a real estate agent and said, "It's not going to work. What am I going to do?"

And she said, "Just buy the building anyway, it's a great investment."

Well, I almost walked away from it, but I took her advice, bought the building, leased it to Greg Bradshaw, rest in peace. He put a Tacorita in there. And it was a great addition to downtown. So I kind of back-doored into commercial real estate.

And once I did that, I was like, "Well, I like this downtown thing." Because then I started understanding how vibrant downtown is. Then I bought a couple more spaces downtown. So I really got into it by accident. But it was because of my passion for downtown I got into it by accident.

I wouldn't have accidentally bought a property in downtown X, Y, Z, Wetumpka, Birmingham, Nashville, wherever. It was Auburn, because I spend as much time possible in Auburn. And that was where my passion is.

Sarah:

So you talked a little bit about COVID. What are some of the other challenges that you've experienced in your career?

Steve Fleming:

Being in mortgage, it is such a cyclical business, and it's learning to live with the highs and the lows.

What I mean by that is as the interest rate cycles fluctuate, sometimes you have a whole lot of business. And you would say, first of all, "Yay, that's a great thing." I mean, it is. Because the more customers, the more revenue, the more revenue, the more money everybody makes.

But from a manager standpoint, when I was the president of the mortgage company, I had to manage through the production cycle of, "We are staffed for X amount of business, and we have X times two amount of business right now."

And the employees understood. They were all, to some degree, on some sort of incentive or commission. So the more they did, the more they made. But when those cycles, that you think are going to be a six-week cycle, become a six-month cycle or a nine-month cycle or a 12-month cycle, you can't hire enough people to cover that cycle.

First of all, it's not fair to the employee to hire them today, knowing you're going to fire them nine months later when the cycle's over. So we never tried to staff that way. But it was really hard on the employees when you're working 10, 12, 14-hour days; and this really was before remote working became a thing. So the office was a challenging place to work at times.

Then all of a sudden, the Fed changes monetary policy. Something happens at a macro level in the economy, and now we're dealing with the exact opposite. Now you've got people who are used to making at the top end of the curve, and their income is at the bottom end of the curve. So you get to play counselor a whole lot, and make people understand the cyclical nature of the business.

But then I've got excess overhead. And then I have to work with my superiors, my people up the org chart and have them understand that, "Those people were the ones that 18 months ago were working 70 hours a week, and now they may only be working 20 hours a week."

But it's that, "How do you level out the highs and lows?" When you've got 30-year fixed rates at 2-3/4%, a customer calls you up; you can't say to them, "Well, my schedule's booked, but I'll see you in 120 days." A doctor can do that. A dentist can do that. But a mortgage guy can't do that.

So learning to live with the cyclicality of the industry was hard for the staffing-

Currie:

Staffing.

Steve Fleming:

... for the individual people, but also just from running a company.

Sarah:

Just as a follow-up, no one can predict the Fed's actions. But what are some of the things that help mitigate some of that chaos?

Steve Fleming:

You're right. People always say to me, "What do you think rates are going to do?" And my standard answer is, "If I knew that, you couldn't afford to talk to me, I'd be in Wall Street, I'd be selling bonds and making a bunch of money."

We had a very wise man at the bank when I started in 1990. And his advice to me was run the company as if you're on the verge of a recession every week. And that's overtax, don't overextend. Don't overexpend your assets. Make sure you're always running it as if the bottom could fall out, because it will.

Now, you got to live with the upper end of the curve. That's why we never staffed up. We would never go in and add extra employees if we didn't have to, because that bottom is coming.

And if you always think about, "We're on the verge of recession;" whether we are or not; but if you live your life that way, you'll make sure that your personal finances are always in good shape. You'll make sure that your corporate finances are always prepared for that downturn.

Currie:

You are on the front end driving some very important things in Auburn that are going to help shape the athletic landscape. Can you talk to us a little bit about your involvement with the NIL, and why you chose to do that?

Steve Fleming:

Obviously, I'm an Auburn fan of every sport. I live in downtown Auburn. I walk to almost every competition available. So I want our school to be competitive. But also from a selfish standpoint, I also want downtown to boom.

And if you just have a correlation, look at what Bruce has done for basketball. How many people are coming to town now, staying in hotel rooms, going to restaurants, buying meals? So the more successful the athletic program is, the more successful my tenants are in my property. So there is a correlation there.

But when this whole NIL thing started, I wanted to be involved. But I wanted to be involved with some very strict parameters. And so a group of seven of us, seven Auburn graduates got together through just a bunch of mutual friends, and we set up a collective called On To Victory. And we had some basic guidelines.

Number one, we were going to be transparent. So if you're a donor of $25,000 a year or more, we have a meeting where we go over financials. We show you exactly what our office expenses are, what our salary expenses are. We don't go over what the athletes' contracts are, because that's really confidential. But we want to be transparent.

We also want to be efficient. The United Way generally works on a 10% expense, 90% pass-through model. And our goal is to surpass that. We want to have less than 10% expenses, and take more than 90% of our revenue and pass it through. We saw a need, and we're creating a brand-new business model that's never existed before.

In mortgage, I could plagiarize. I could look at what my competitors were doing, I could look at what friends in Oklahoma were doing at their mortgage company, and take the best of those and put it together.

With NIL, we've literally had to create an entire industry from scratch with really no notice. You had to step in as soon as the Supreme Court ruled that the student athletes could monetize their name, image, and likeness. It was an immediate thing.

So we didn't want Auburn to fall behind. And fortunately, through some generosity of some donors, we were able to plug the gap. Initially, we've set up a fairly successful campaign where we're asking for pledges over three years from major donors.

We're now working on a campaign where every Auburn donor at every level can contribute to us. So if you enjoy watching Suni Lee, if you enjoy watching Tank Bigsby run down the field for touchdowns, we need every Auburn fan to support us.

And they can do that; I'll put a shameless plug in; go to ontovictory.com and there's a $34 monthly subscription. There's $1,000 a month, whatever level you can give. Remember, it's not coming to me personally. We will never make a profit. I will never take a salary. We've all taken a pledge as a board member, we'll never receive compensation. And if for some reason a court or the NCAA were to deem that we're no longer eligible to stay in business, 100% of our assets will be donated to Auburn University.

We are technically a for-profit company. We've not organized as a 501(c)(3), but we are a for-profit company that intends to give every penny of our profit to Auburn student athletes.

Currie:

Steve, it's true: you created a business model that never really existed before. Can you unpack that a little bit, and explain how you came up with that?

Steve Fleming:

There was an existing NIL collective in town that started, that we took over the assets of that NIL company. So we did have a few-month head start on it.

And then we looked at ourselves as donors and said, "Okay, if I'm going to write a check to support women's softball; whatever it is; what do I as a donor want to know?" And so we built an NIL collective around what we think how a donor would like to be treated: the transparency, the efficiency, the no-profit motive.

Now, believe me, all this came about over many, many, many weeks and dozens of meetings. There was a lot of debate on whether we were going to be a 501(c)(3) versus a for-profit company. But we all kept asking ourselves, "We're donors. How do we want to be treated?"

I don't know if it's a state-of-the-art business model. But I know several other schools have inquired about what we've done, because I think we have the reputation of doing it the right way.

One of our founding principles is we're going to always be in compliance with NCAA and Auburn University regulations. So we try to have regular communication with Auburn University compliance. We want to adhere to not just the letter, but the spirit of the NCAA regulations. Which is difficult, because we're not getting some great guidance from the NCAA. We're not getting it timely, but we're trying.

We're never going to embarrass our university. We're never going to do anything to get our university in trouble. We're here to only be helpful.

Currie:

How do you determine the monetary value of an athlete?

Steve Fleming:

That's a very tricky question. An answer is, the board does. From a board perspective, we allocate a budget to our director, Brett Whiteside, who's doing an incredible job. And then Brett has advisors that he brings in that have knowledge of each sport.

They'll look at a potential baseball person ... And again, it's only once they're on campus, once they've signed a Grant-In-Aid. We don't negotiate at all until they're a student athlete, signed a Grant-In-Aid and enrolled, and then we don't get the coaches involved. The NCAA currently won't let us communicate with the coaches. So there's a really art form to it.

But we have a lot of former players in each sport that then they try to judge, "What do we think this five-star quarterback at Auburn's NIL value is going to be worth to us?" And it's a guessing game.

The problem is we can't communicate with that quarterback while he's in his recruiting process. So you hope he doesn't get to campus and think his value is a humongous number, and we think his value is a smaller number. Or no matter what we think it is, we can only pay what we've got in the bank.

So you hope you don't have that sort of disconnect that as soon as somebody enrolls in January, an early enrollee, they sit down with our director, we've given them our NIL value, that it becomes a contentious point.

I would love for the NCAA to allow us to communicate earlier. I'd love for the NCAA to allow the coaches to be involved in that. But as of right now, that's not happening. So we're going to comply with the spirit and the letter of the law, and we're just doing the best we can.

Now, that being said, if you're a donor and you say, "I love that setter for volleyball. That's my favorite athlete. I would like to give her a particular NIL contract," you can do a particular contract for one individual athlete.

You can't do it until they're a student enrolled at Auburn University, but you can come through our collective. The university has a way that you can go through their system and do a one-off standalone deal. So if you want to support just an athlete, you're more than welcome to do that.

What you can't do is say, "There's a really good point guard at Hoover High School, and I want him to come to Auburn. I'm going to do an NIL deal before he signs at Auburn." That's illegal. That'll make him ineligible. We can't have that happen.

Sarah:

So what are some of the greatest business lessons you've learned as a mortgage guru, a commercial real estate developer, and leader on the NIL landscape?

Steve Fleming:

I think back to, it was probably in April of 1990. I was hired to be the president of a mortgage company for National Bank of Commerce in March. And we had one of our first loans, and it got messed up.

We had to do one of two things. We had to call a customer up and go, "I know you think this was going to happen, but it's not going to." Or, we had to go to the bank and say, "We made a big mistake, and it's going to cost us a bunch of money to make the customer whole."

And John Holcomb was the CEO of the bank at the time, who's just a great man, a great mentor. I'll never forget: I went to his office and I started explaining to him.

And he said, "Wait, just stop right there. What's the right thing to do?"

And I said, "Well ..."

He said, "No, what's the right thing? Don't worry about money. Don't worry about cost. Always do the right thing, and it'll pay you back 10 times over."

I'll never forget that lesson. He had a little crooked finger. He would point at me and say, "Do the right thing." When I would hire somebody, they always got that story: do the right thing.

Now that doesn't mean that you can intentionally put the bank in the wrong place, and give the customer a 2% rate when the market's at 8% rate. If you do it for the wrong reason, you get fired. But if we just make a mistake and it's not the customer's fault, do the right thing.

Also, don't rub it in the customer's face. You don't call up and say, "Hey, I could have raised your rate to 7%, but I'm going to give you the 6% rate. But boy, aren't we great people?" You don't do it. You just do it in the background. Do the right thing, and it will pay you back 1,000 times over.

Keeping your name, keeping your ethics, keeping your reputation is so important. It's not worth a deal. It's not worth a dollar to compromise any of that. That all falls under that "Do the right thing" mantra. I don't care if you're mortgage, NIL; I don't care if you're a coach, an athlete; just do the right thing.

Sarah:

So how can our listeners keep up with you and contact you?

Steve Fleming:

My email address is Steven with a v dot D dot fleming. So steven.d.fleming@gmail.com. And my personal cell phone is 205-879-1719. I tried to get 1716 for the Punt Bama Punt, but 16 was taken. Just turned the six upside down and got 1719.

Currie:

That's great.

Sarah:

Well, Steve, it's been a pleasure speaking with you today.

Currie:

Thank you so much.

Sarah:

We really appreciate your time. Thank you so much. And War Eagle.

Currie:

War Eagle.

Steve Fleming:

War Eagle.

Narrator:

Harbert: Inspiring Business.